-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, T8fsfEMUZS0xIhz21W0x5sKNFdhlmagSJSWCMwYaJLw07wsni6EOaFGLafGZHQYl BPGDNOTMD/VYrldeQLnB2w== 0000073773-99-000004.txt : 19990517 0000073773-99-000004.hdr.sgml : 19990517 ACCESSION NUMBER: 0000073773-99-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OI CORP CENTRAL INDEX KEY: 0000073773 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY ANALYTICAL INSTRUMENTS [3826] IRS NUMBER: 730728053 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-06511 FILM NUMBER: 99621426 BUSINESS ADDRESS: STREET 1: P O BOX 9010 STREET 2: 151 GRAHAM RD CITY: COLLEGE STATION STATE: TX ZIP: 778429010 BUSINESS PHONE: 4096901711 MAIL ADDRESS: STREET 1: 151 GRAHAM RD STREET 2: P O BOX 9010 CITY: COLLEGE STATION STATE: TX ZIP: 77842-9010 FORMER COMPANY: FORMER CONFORMED NAME: OCEANOGRAPHY INTERNATIONAL CORP DATE OF NAME CHANGE: 19801205 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [ ] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 1999 [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ________ to _________ Commission File Number: 0-6511 O. I. CORPORATION _______________________________________________________ (Exact name of registrant as specified in its charter) OKLAHOMA 73-0728053 _________________________ _______________________________ State of Incorporation I.R.S. Employer Identification No. P.O. Box 9010 151 Graham Road College Station, Texas 77842-9010 ______________________________________ ____________________ (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (409) 690-1711 Not Applicable ________________________________________________________________ Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No _____ _____ Number of shares outstanding of each of the issuer's classes of common stock, as of March 31, 1999: 3,353,285 shares O.I. CORPORATION Condensed Consolidated Balance Sheet (In thousands) (unaudited) March 31, December 31, 1999 1998 _________ ___________ ASSETS Current assets: Cash and cash equivalents . . . . . . . . . $ 2,005 $ 1,537 Short-term investments. . . . . . . . . . . 1,994 2,772 Accounts receivable-trade, net of allowance for doubtful accounts of $255,000 and $216,000, respectively. . . . . . . . . . 3,668 3,361 Investment in sales-type leases . . . . . . 530 459 Inventories . . . . . . . . . . . . . . . . 4,474 4,917 Current deferred tax asset. . . . . . . . . 538 538 Other current assets. . . . . . . . . . . . 79 302 ________ ________ TOTAL CURRENT ASSETS. . . . . . . . . . 13,288 13,886 Property, plant and equipment, net. . . . . . 3,644 3,620 Investment in sales-type lease, net of current 707 576 Goodwill. . . . . . . . . . . . . . . . . . . 1,444 399 Other assets. . . . . . . . . . . . . . . . . 418 348 ________ ________ TOTAL ASSETS. . . . . . . . . . . . . . $ 19,501 $ 18,829 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable. . . . . . . . . . . . . . $ 1,092 $ 1,198 Accrued compensation. . . . . . . . . . . . 570 752 Accrued expenses. . . . . . . . . . . . . . 2,535 1,907 ________ ________ TOTAL CURRENT LIABILITIES . . . . . . . 4,197 3,857 Deferred income taxes . . . . . . . . . . . . 219 228 ________ ________ TOTAL LIABILITIES . . . . . . . . . . . 4,416 4,085 Stockholders' equity: Preferred stock, $0.10 par value, 3,000,000 shares authorized, no shares issued and outstanding Common stock, $0.10 par value, 10,000,000 shares authorized, 4,103,377 shares issued 410 410 Additional paid in capital . . . . . . . . . 4,375 4,374 Treasury stock, 750,092 and 754,334 shares, respectively, at cost. . . . . . . . . . . (3,312) (3,328) Retained earnings. . . . . . . . . . . . . . 13,612 13,288 _______ _______ TOTAL STOCKHOLDERS' EQUITY . . . . . . . 15,085 14,744 _______ _______ TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 19,501 $ 18,829 ======= ======= O.I. CORPORATION Condensed Consolidated Statement of Earnings (In thousands, except share and per share data) (unaudited) Three Months Ended March 31, _________________________ 1999 1998 ___________ ___________ Net sales . . . . . . . . . . . . . . . . . . $ 6,105 $ 5,825 Cost of goods sold. . . . . . . . . . . . . . 3,480 3,104 __________ __________ Gross profit. . . . . . . . . . . . . . . . . 2,625 2,721 Research and development expenses . . . . . . 389 384 Selling, general & administrative expenses. . 1,823 1,777 __________ __________ Operating income. . . . . . . . . . . . . . . 413 560 Interest income/other income. . . . . . . . . 102 130 Interest expense. . . . . . . . . . . . . . . 0 0 __________ __________ Income before income taxes. . . . . . . . . . 515 690 Provision for taxes on earnings . . . . . . . (192) (257) __________ __________ Net income. . . . . . . . . . . . . . . . . . $ 323 $ 433 ========= ========== Weighted average number of shares outstanding, basic. . . . . . . . . . . . . 3,351,274 3,822,306 Basic earnings per share. . . . . . . . . . . $ 0.10 $ 0.11 Weighted average number of shares outstanding, assuming dilution. . . . . . . 3,461,749 3,882,431 Diluted earnings per share. . . . . . . . . . $ 0.09 $ 0.11 Dividends per share . . . . . . . . . . . . . -0- -0- O.I. CORPORATION Condensed Consolidated Statement of Cash Flows (In thousands) (unaudited) Three Months Ended March 31, ______________________ 1999 1998 _________ _________ CASH FLOW FROM OPERATING ACTIVITIES: Net income . . . . . . . . . . . . . . . . $ 323 $ 433 Depreciation & amortization. . . . . . . . 151 104 Deferred income taxes (9) (19) Change in working capital, net of effect of purchase of GAC . . . . . . . . . . (396) (302) Net cash flows provided by operating activities . . . . . . . . . . . . . . 69 216 CASH FLOW FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock . . 16 5 Purchase of treasury stock . . . . . . . . 0 (510) Net cash flows provided by (used in) financing activities 16 (505) CASH FLOW FROM INVESTING ACTIVITIES: Purchase of property, plant & equipment. . (150) (57) Sale of property, plant & equipment. . . . 20 6 Purchase of GAC. . . . . . . . . . . . . . (260) 0 Purchase of investments. . . . . . . . . . 0 (2,338) Maturity of investments. . . . . . . . . . 778 2,595 Change in other assets . . . . . . . . . . (5) 5 Net cash flows provided by investing activities 383 211 INCREASE (DECREASE) IN CASH. . . . . . . . . . 468 (78) Cash and cash equivalents at beginning of quarter 1,537 1,430 Cash and cash equivalents at end of quarter $ 2,005 $ 1,352 O.I. CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. The accompanying unaudited consolidated financial statements have been prepared by O.I. Corporation and include all adjustments which are, in the opinion of management, necessary for a fair presentation of financial results for the three months ended March 31, 1999 and 1998, pursuant to the rules and regulations of the Securities and Exchange Commission. All adjustments and provisions included in these statements are of a normal recurring nature. All significant intercompany balances and transfers have been eliminated. For further information regarding the Company's accounting policies, refer to the Consolidated Financial Statements and related notes included in the Company's Annual Report and Form 10-K for the year ended December 31, 1998. The Company develops, manufactures, markets and services analytical, monitoring and sample preparation products, components and systems used to prepare samples for analysis and to detect, measure and analyze chemical compounds. Sales of the Company's products are recorded based on shipments of products with no substantial right of return. Effective February 1, 1999, the Company paid approximately $261,000 to acquire certain assets and assumed certain liabilities of General Analysis Corporation. The Company has recognized approximately $1,065,000 of goodwill in connection with the acquisition. The purchase price allocation is preliminary. Thus, as additional information concerning the value of assets acquired and liabilities assumed becomes known, adjustments will be made to the purchase price allocation. The acquisition is not expected to significantly impact the Company's financial condition or results of operations. 2. INVENTORIES. Mar. 31, 1999 Dec. 31, 1998 _____________ _____________ Raw Materials $ 2,342,000 $ 2,041,000 Work in Process 540,000 810,000 Finished Goods 1,592,000 2,066,000 ____________ _____________ $ 4,474,000 $ 4,917,000 3. EARNINGS PER SHARE. The Company reports both basic earnings per share, which is based on the weighted average number of common shares outstanding, and diluted earnings per share, which is based on the weighted average number of common shares outstanding and all dilutive potential common shares outstanding. Stock options are the only dilutive potential shares the Company has outstanding. At March 31, 1999, options to acquire 94,800 shares of common stock at weighted average exercise prices of $7.60 per share were not included in the computation of dilutive earnings per share as the options' exercise price was greater than the average market price of the common shares. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Form 10Q includes certain statements that may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this Form 10Q that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future, are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. OPERATING RESULTS Net sales for the quarter ended March 31, 1999 increased 5% to $6,105,000, compared to $5,825,000 for the same period of the prior year, primarily due to sales from General Analysis Corporation (GAC) acquired on February 1, 1999. Sales of total organic carbon (TOC) analyzers and sample preparation products were down, while sales of gas chromatography (GC) systems and components and revenue derived from service increased slightly. Sales of flow analyzers were relatively flat. First quarter 1999 international sales were down compared to the same quarter of 1998 while domestic sales increased. In the domestic market, sales of water analysis products to the pharmaceutical and semiconductor industries were down compared to prior year, while sales to the environmental market were flat compared to prior year. International sales were down in all markets compared to prior year, and the Company continues to emphasize sales to international markets by investing in staff and travel to Asia and Europe. Gross profit was $2,625,000, or 43% of sales, for the first quarter of 1999, compared to $2,721,000, or 47% of sales, for the same quarter of 1998. The decrease in gross profit was due to product mix, an increase in the cost related to service revenue, an increase in warranty expense, and an increase in unabsorbed manufacturing expenses. Gross profit was also negatively impacted due to operating inefficiencies and transition costs relating to the acquisition of GAC. Research and development (R&D) expenses for the first quarter of 1999 were $389,000, or 6.4% of sales, compared to 1998 first quarter expenses of $384,000, or 6.6% of sales. The Company's product development effort consists of improving existing products and developing possible new products and applications. Selling, general, and administrative (SG&A) expenses for the first quarter of 1999 increased 3% to $1,823,000, or 31% of sales, compared to $1,777,000, or 31% of sales for 1998. SG&A expenses for the first quarter of 1999 were higher than 1998 due to the acquisition of GAC. Salaries, rent, and other related expenses increased due to the acquisition and addition of the GAC office in South Norwalk, CT. Income before tax for the first quarter of 1999 amounted to $515,000, compared to $690,000 for the same period of 1998. The lower profit for 1999 was primarily a result of decreased gross margin and increased SG&A expense. The effective tax rates were 37% for 1998 and 1999. Net income after tax for the first quarter of 1999 was down 25% to $323,000, compared to $433,000 in the same period of 1998. Basic earnings per share was $0.10 per share in the first quarter of 1999 compared to $0.11 per share for the same period of 1998. Diluted earnings per share decreased to $0.09 per share in the first quarter of 1999, compared to $0.11 per share in the first quarter of 1998. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents totaled $2,005,000 as of March 31, 1999, compared to $1,537,000 as of December 31, 1998. Working capital, as of March 31, 1999, was $9,091,000, compared to $10,029,000 as of December 31, 1998. Working capital decreased primarily due to a decrease in inventory and an increase in accrued liabilities. Much of the increase in accrued liabilities related to the acquisition of GAC. Working capital, as a percentage of total assets, was 47% as of March 31, 1999, compared to 53% at December 31, 1998. The current ratio was 3.2 to 1 at March 31, 1999, as compared to 3.6 to 1 at December 31, 1998. Total liabilities to equity was 29% as of March 31, 1999, compared to 28% as of December 31, 1998. Net cash flow provided from operating activities for the period ending March 31, 1999, was $69,000, as compared to $216,000 for the same period of 1998. The decrease in cash flow from operating activities for 1998 was primarily due to the decrease in net income and an increase in accounts receivable and investment in sales-type leases, offset in part by a decrease in inventory. Net cash flow provided by (used in) financing activities for the first quarter 1999 was $16,000, compared to ($505,000) for the first quarter 1998. The increase in cash flow provided by financing activities was the result of the Company not purchasing any treasury stock during the first quarter of 1999. Net cash flow provided by investing activities was $383,000 for the first quarter 1999, compared to $211,000 for the first quarter 1998. The increase in cash provided by investing activities was due to the maturity of certain investments, offset in part by the purchase of GAC. The Company has financed its growth from funds generated from operations and expects to continue to do so for the foreseeable future. Management regularly evaluates opportunities to acquire products or businesses complementary to the Company's operations. Such acquisition opportunities, if they arise and are successfully consummated, may involve the use of cash, or, depending upon the size and terms of the acquisitions may involve equity or debt financing. Although the Company has completed five acquisitions in the past five years, the Company cannot guarantee that it will be able to successfully consummate any future acquisitions or that, if consummated, that they will have either a short-term or a long-term positive effect on the Company's results of operations. MARKET RISK The Company is exposed to a variety of risks, including changes in interest rates and the market value of its investments. In the normal course of business, the company employs, established polices and procedures to manage its exposure to changes in the market value of its investments. To date, the Company has not experienced any material effects to its financial position or results of operations due to market risks. The fair value of the Company's investments in debt securities at March 31, 1999 was $1,996,451. YEAR 2000 Year 2000 Issue. Many software applications, hardware and equipment and embedded chip systems identify dates using only the last two digits of the year. These products may be unable to distinguish between dates in the year 2000 and the dates in the year 1900. That inability (referred to as the "Year 2000" issue), if not addressed, could cause applications, equipment or systems to fail or provide incorrect information after December 31, 1999, or when using dates after December 31, 1999. This in turn could have an adverse effect on the Company due to the Company's direct dependence on its own applications, equipment, and systems and indirect dependence on those of other entities with which the Company must interact. Compliance Program. In order to address the Year 2000 issue, the Company established during 1998 a project team to assure that key automated systems and related processes will remain functional through year 2000. The team will address the project in the following stages: (i) awareness, (ii) assessment, (iii) remediation, (iv) testing and (v) implementation of the necessary modifications. The key automated systems consist of (a) project estimating, management and financial systems applications, (b) hardware and equipment, (c) embedded chip systems, and (d) third-party developed software. The evaluation of the Year 2000 issue includes the evaluation of the Year 2000 exposure of third parties material to the operations of the Company. Company State of Readiness. The awareness phase of the Year 2000 project has begun with a corporate-wide awareness program , which will continue to be updated throughout the life of the project. The assessment phase of the project involves, among other things, efforts to obtain representations and assurances from third parties, including third party vendors, that their hardware and equipment, embedded chip systems and software being used by or impacting the Company or any of its business units are or will be modified to be Year 2000 compliant. To date, the Company does not expect that responses from such third parties will be conclusive. As a result, management cannot predict the potential consequences if these or other third parties are not Year 2000 compliant. The exposure associated with the Company's interaction with third parties is also currently being evaluated. Through the awareness program, the Company has determined that some internal applications are not Year 2000 compliant. The Company plans to replace or upgrade these systems by mid-1999. The Company has evaluated its products and believes that most of the products it is currently shipping are Year 2000 compliant. The Company has plans to upgrade the products that are not Year 2000 compliant and anticipates completion of this process during 1999. The Company believes it has no legal obligation to upgrade previously shipped products that are not Year 2000 compliant. It may make available for sale compliance fixes for certain products. Management expects that the remediation, testing, and implementation phases will be completed prior to the Year 2000. Costs to Address Year 2000 Compliance Issues. While the total cost to the Company of the Year 2000 project is still being evaluated, management currently estimates that the costs to be incurred by the Company in 1999 and 2000 associated with assessing and testing applications, hardware and equipment, embedded chip systems, and third party developed software will be less than $150,000. To date, the Company has not expended significant funds related to its Year 2000 compliance assessment. Risk of Non-Compliance and Contingency Plans. The major applications, which pose the greatest Year 2000 risks for the Company if implementation of the Year 2000 compliance program is not successful, are the Company's systems, financial systems applications and related third-party software. Potential problems if the Year 2000-compliance program is not successful include disruptions of the Company's revenue gathering from and distribution to its customers and vendors and the inability to perform its other financial and accounting functions. The goal of the Year 2000 project is to ensure that all of the critical systems and processes, which are under the direct control of the Company, remain functional. However, because certain systems and processes may be interrelated with systems outside of the control of the Company, there can be no assurance that all implementations will be successful. Accordingly, as part of the Year 2000 project, contingency and business plans will be developed to respond to any failures as they may occur. Such contingency and business plans are scheduled to be completed during 1999. Because the Company's internal systems are PC-based, management does not expect the costs to the Company of the Year 2000 project to have a material adverse effect on the Company's financial position, results of operations or cash flows. However, based on information available at this time, the Company cannot conclude that any failure of the Company or third parties to achieve Year 2000 compliance will not adversely affect the Company. PART II: OTHER INFORMATION Item 1. Legal Proceedings: None Item 2. Changes in Securities: None Item 3. Defaults upon Senior Securities: None Item 4. Submission of Matters to a Vote of Security Holders: None Item 5. Other Information: None Item 6. Exhibits and Reports on Form 8-K: Reference is made to the Reports on Form 8-K filed on February 12, 1999 and April 12, 1999. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. O.I. CORPORATION (Registrant) Date: May 13, 1999 BY: /s/ William W. Botts ___________________________ William W. Botts President/CEO Date: May 13, 1999 BY: /s/ Julie A. Wright ___________________________ Julie A. Wright Controller EX-27 2
5 This schedule contains summary financial information extracted from the condensed consolidated balance sheet and the condensed consolidated statement of earnings and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-1998 MAR-31-1999 2,005,000 1,994,000 3,923,000 255,000 4,474,000 13,288,000 5,828,000 2,184,000 19,501,000 4,197,000 0 0 0 410,000 14,675,000 19,501,000 6,105,000 6,105,000 3,480,000 1,237,000 975,000 0 0 515,000 192,000 323,000 0 0 0 323,000 0.10 0.09
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